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Don’t let your cashflow get “sleighed” this Christmas

‘Twas the night before Christmas, when all through the firm
Every creditor was chasing, the directors were beginning to squirm
The bank account was empty, the cheques won’t be clear
Not even St Nic, can help at this time of the year

Unless you work in the retail sector, Christmas can be one of the most challenging times for small businesses in terms of cashflow. Most businesses experience a downturn in work in the lead up to the festive period and for a few weeks after, however, your creditors will still need paying on their usual terms and the employees expect their wages as normal when at this time of year, the production rate may not be there.

Plan early to avoid cash flow problems at Christmas

To survive this, small businesses need to start planning early. The key point is not to wait until February to get paid for the work completed in November. There are a few more tips below which may help you survive the Christmas period and allow directors and stakeholders to enjoy their turkey with less worry.

1. We know it can be a pain, especially for small businesses, but it is important to prepare a detailed cashflow for December through to January. Trust me, the hassle will be worth it. This could highlight if there are likely to be any significant cashflow problems on the horizon. The cashflow may appear daunting at first but once you get stuck in and finish the first week it should be relatively easy to complete. It does not need to be anything fancy, an excel spreadsheet is the norm, and there are many templates available on the web that have done most of the hard work for you. If in doubt, talk to your accountant.

2. Get your invoices raised early. Do them now. Why wait, if the work is done get somebody started on this immediately. Wait another week and you will be looking at payment in January, providing that they don’t need a week of chasing first. How pleasing would it feel to come back to work in January with the renewed enthusiasm and a healthy bank balance.

3. Christmas discount. Is there a relatively good profit margin in your sales? Could you offer a ‘Christmas Discount’ for payment upfront or early settlement? Not only will this help with the cashflow before Christmas but you could use this as a marketing tool and it is another opportunity to remind your customers that you are awaiting payment.

4. Sit down and do your homework. Review your debtor report and find out who owes you money that will fall due over Christmas? Do these customers close for the festive period? This may mean late payment. Once this exercise has been done talk to these customers about arranging payment before they close, again consider the benefit of an early discount. If the firm itself is not closing over Christmas but the accounts person is taking Christmas leave, make sure you have an alternative contact.

5. Try to keep your own cash reserves as high as possible. In the lead up to Christmas it might be sensible to use the full payment terms that you have with suppliers. There is little point at this time of year in paying invoices early unless you receive an early settlement discount.

6. Avoid any unnecessary expenditure. Can a purchase wait until the new year? If bulk buying stock be careful not to buy stock that would be difficult to move over the Christmas period.

7. Try to return the favour. The festive season can be difficult for most businesses, including your creditors. Try to keep the communication channels open with them; they are experiencing similar problems to you. If you can’t pay an invoice then try to agree to a payment plan.

In all the instances highlighted above, a Cashsolv business loan can help you overcome seasonal financial pressure. Whether it due to a drop in business or creditors not paying you, providing your business is viable, we can tailor a loan based on your needs.